Question 1

Between 2000 and 2006, there was a housing bubble in the United States. A bubble is:

Accepted Answer

A) a fluctuation in asset prices that leads to inherent instability. 
B) an increase in asset prices driven by unrealistic expectations about future prices. 
C) individuals reselling assets rapidly to make quick profit. 
D) speculation by unscrupulous investors. 
A) a fluctuation in asset prices that leads to inherent instability. 
B) an increase in asset prices driven by unrealistic expectations about future prices. 
C) individuals reselling assets rapidly to make quick profit. 
D) speculation by unscrupulous investors.

Question 2

Someone who is risk-averse is:

Accepted Answer

A) willing to expend whatever resources necessary to gain an uncertain amount of money. 
B) willing to spend more resources to avoid losing a given sum of money than to gain the same sum of money. 
C) irrational in the need to hold all assets in liquid form. 
D) one who does not believe in financial risk. 
A) willing to expend whatever resources necessary to gain an uncertain amount of money. 
B) willing to spend more resources to avoid losing a given sum of money than to gain the same sum of money. 
C) irrational in the need to hold all assets in liquid form. 
D) one who does not believe in financial risk.

Question 3

Which of the following is NOT a stock market index?

Accepted Answer

A) the Dow Jones Industrial Average 
B) the producer price index 
C) the S&P 500 
D) the NASDAQ 
A) the Dow Jones Industrial Average 
B) the producer price index 
C) the S&P 500 
D) the NASDAQ

Question 4

Which of the following is NOT one of the three tasks of a financial system?

Accepted Answer

A) reduction of transaction costs 
B) risk management 
C) provision of liquidity 
D) determination of fiscal policy 
A) reduction of transaction costs 
B) risk management 
C) provision of liquidity 
D) determination of fiscal policy

Question 5

Use the following to answer questions :
Figure: The Market for Loanable Funds II  
-(Figure: The Market for Loanable Funds II) Look at the figure The Market for Loanable Funds II. If the interest rate is lower than 8%, the quantity supplied of loanable funds will _____ the quantity of loanable funds demanded.

Accepted Answer

A) be greater than 
B) be less than 
C) equal 
D) The quantity supplied of loanable funds cannot be determined from the information provided. 
A) be greater than 
B) be less than 
C) equal 
D) The quantity supplied of loanable funds cannot be determined from the information provided.

Question 6

Use the following to answer questions:
Table: Investment Projects  
-(Table: Investment Projects) Look at the table Investment Projects. If the market interest rate declines from 15% to 13%, then the amount of investment demanded will increase by:

Accepted Answer

A) $200. 
B) $1,000. 
C) $2,000. 
D) $2,200. 
A) $200. 
B) $1,000. 
C) $2,000. 
D) $2,200.

Question 7

The government saves when:

Accepted Answer

A) tax revenue is less than government spending. 
B) tax revenue is more than government spending. 
C) tax revenue equals government spending. 
D) tax revenue is positive. 
A) tax revenue is less than government spending. 
B) tax revenue is more than government spending. 
C) tax revenue equals government spending. 
D) tax revenue is positive.

Question 8

Which of the following is (are) a task(s) of the financial system?
I. reducing transactions costs
II. reducing risk
III. providing liquidity

Accepted Answer

A) I only 
B) II only 
C) III only 
D) I, II, and III 
A) I only 
B) II only 
C) III only 
D) I, II, and III

Question 9

Use the following to answer questions :
Scenario: Open Economy S = I
In an open economy GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion.
-(Scenario: Open Economy S = I) Look at the scenario Open Economy S = I. How much is private saving?

Accepted Answer

A) $4 trillion 
B) $2.5 trillion 
C) $3.5 trillion 
D) $1.5 trillion 
A) $4 trillion 
B) $2.5 trillion 
C) $3.5 trillion 
D) $1.5 trillion

Question 10

Private savings equals:

Accepted Answer

A) income after taxes minus consumption. 
B) taxes minus government spending on goods and services. 
C) the total amount of savings accounts plus stocks plus bonds owned by households. 
D) income plus investment. 
A) income after taxes minus consumption. 
B) taxes minus government spending on goods and services. 
C) the total amount of savings accounts plus stocks plus bonds owned by households. 
D) income plus investment.

Question 11

Which of the following is FALSE? When there is an increase in:

Accepted Answer

A) the government budget deficit, the total amount of borrowing falls. 
B) private savings, the interest rate decreases. 
C) the government budget deficit, private investment is crowded out. 
D) private savings, the total amount of borrowing increases. 
A) the government budget deficit, the total amount of borrowing falls. 
B) private savings, the interest rate decreases. 
C) the government budget deficit, private investment is crowded out. 
D) private savings, the total amount of borrowing increases.

Question 12

Use the following to answer questions:
Figure: Loanable Funds  
-(Figure: Loanable Funds) Look at the figure Loanable Funds. Which of the following might produce a new equilibrium interest rate of 5% and a new equilibrium quantity of loanable funds of $150 billion?

Accepted Answer

A) Consumption as a fraction of disposable income increases. 
B) Businesses become more optimistic about the return on investment spending. 
C) The federal government has a budget surplus rather than a budget deficit. 
D) There is an increase in capital inflows from other nations. 
A) Consumption as a fraction of disposable income increases. 
B) Businesses become more optimistic about the return on investment spending. 
C) The federal government has a budget surplus rather than a budget deficit. 
D) There is an increase in capital inflows from other nations.

Question 13

Use the following to answer questions :
Scenario: A Small Economy
Suppose there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year.
-(Scenario: A Small Economy) Look at the scenario A Small Economy. There is a new government and it imposes taxes on its citizens to spend on infrastructure. Taxes and government spending are both $2 trillion. What is the level of investment spending now?

Accepted Answer

A) $7 trillion 
B) $5 trillion 
C) $18 trillion 
D) -$4 trillion 
A) $7 trillion 
B) $5 trillion 
C) $18 trillion 
D) -$4 trillion

Question 14

The financial slump that began in the United States in the summer of 2007 was a result of:

Accepted Answer

A) falling energy prices. 
B) massive tax increases necessary to balance the federal budget. 
C) a crisis in the foreign exchange market. 
D) a sharp fall in housing prices. 
A) falling energy prices. 
B) massive tax increases necessary to balance the federal budget. 
C) a crisis in the foreign exchange market. 
D) a sharp fall in housing prices.

Question 15

Use the following to answer questions:
Table: Investment Projects  
-(Table: Investment Projects) Look at the table Investment Projects. If the market interest rate is 17%, the amount of investment demanded is:

Accepted Answer

A) $200. 
B) $800. 
C) $1,000. 
D) $2,000. 
A) $200. 
B) $800. 
C) $1,000. 
D) $2,000.

Question 16

Use the following to answer questions :
Table: National Income Accounts
  
-(Table: National Income Accounts) Look at the table National Income Accounts. The value of investment spending is:

Accepted Answer

A) $15.9 trillion. 
B) $4.9 trillion. 
C) $2.1 trillion. 
D) -$0.5 trillion. 
A) $15.9 trillion. 
B) $4.9 trillion. 
C) $2.1 trillion. 
D) -$0.5 trillion.

Question 17

Assuming a positive interest rate, the present value of a future payment is _____ its future dollar amount.

Accepted Answer

A) exactly the same as 
B) approximately the same as 
C) less than 
D) more than 
A) exactly the same as 
B) approximately the same as 
C) less than 
D) more than

Question 18

An illiquid asset can be quickly converted to cash with little or no loss of value.

Accepted Answer

A) True 
 B)False

Question 19

Use the following to answer questions :
Scenario: Open Economy S = I
In an open economy GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion.
-(Scenario: Open Economy S = I) Look at the scenario Open Economy S = I. How much is investment spending?

Accepted Answer

A) $2 trillion 
B) $3 trillion 
C) $3.5 trillion 
D) $4 trillion 
A) $2 trillion 
B) $3 trillion 
C) $3.5 trillion 
D) $4 trillion

Question 20

The primary purpose of financial intermediaries it to transform funds gathered from savers into financial assets.

Accepted Answer

A) True 
 B)False

Between 2000 and 2006, there was a housing bubble in the United States. A bubble is:

Someone who is risk-averse is:

Which of the following is NOT a stock market index?

Which of the following is NOT one of the three tasks of a financial system?

Use the following to answer questions: Table: Investment Projects -(Table: Investment Projects) Look at the table Investment Projects. If the market interest rate declines from 15% to 13%, then the amount of investment demanded will increase by:

The government saves when:

Which of the following is (are) a task(s) of the financial system? I. reducing transactions costs II. reducing risk III. providing liquidity

Private savings equals:

Which of the following is FALSE? When there is an increase in:

Use the following to answer questions: Figure: Loanable Funds -(Figure: Loanable Funds) Look at the figure Loanable Funds. Which of the following might produce a new equilibrium interest rate of 5% and a new equilibrium quantity of loanable funds of $150 billion?

The financial slump that began in the United States in the summer of 2007 was a result of:

Use the following to answer questions: Table: Investment Projects -(Table: Investment Projects) Look at the table Investment Projects. If the market interest rate is 17%, the amount of investment demanded is:

Use the following to answer questions : Table: National Income Accounts -(Table: National Income Accounts) Look at the table National Income Accounts. The value of investment spending is:

Assuming a positive interest rate, the present value of a future payment is _____ its future dollar amount.

An illiquid asset can be quickly converted to cash with little or no loss of value.

The primary purpose of financial intermediaries it to transform funds gathered from savers into financial assets.

First Principles

Economic Models

Supply and Demand

International Trade 5

Macroeconomics: the Big Picture

Gdp and Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Fiscal Policy Appendix Taxes and the Multiplier

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Crises and Consequences

Events and Ideas

Open-Economy Macroeconomics

Graphs in Economics

toward a Fuller Understanding of Present Value

Filters

Exam 10: Savings, Investment Spending, and the Financial System

Between 2000 and 2006, there was a housing bubble in the United States. A bubble is:

Someone who is risk-averse is:

Which of the following is NOT a stock market index?

Which of the following is NOT one of the three tasks of a financial system?

Use the following to answer questions: Table: Investment Projects -(Table: Investment Projects) Look at the table Investment Projects. If the market interest rate declines from 15% to 13%, then the amount of investment demanded will increase by:

The government saves when:

Which of the following is (are) a task(s) of the financial system? I. reducing transactions costs II. reducing risk III. providing liquidity

Private savings equals:

Which of the following is FALSE? When there is an increase in:

Use the following to answer questions: Figure: Loanable Funds -(Figure: Loanable Funds) Look at the figure Loanable Funds. Which of the following might produce a new equilibrium interest rate of 5% and a new equilibrium quantity of loanable funds of $150 billion?

The financial slump that began in the United States in the summer of 2007 was a result of:

Use the following to answer questions: Table: Investment Projects -(Table: Investment Projects) Look at the table Investment Projects. If the market interest rate is 17%, the amount of investment demanded is:

Use the following to answer questions : Table: National Income Accounts -(Table: National Income Accounts) Look at the table National Income Accounts. The value of investment spending is:

Assuming a positive interest rate, the present value of a future payment is _____ its future dollar amount.

An illiquid asset can be quickly converted to cash with little or no loss of value.

The primary purpose of financial intermediaries it to transform funds gathered from savers into financial assets.

First Principles

Economic Models

Supply and Demand

International Trade 5

Macroeconomics: the Big Picture

Gdp and Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Fiscal Policy Appendix Taxes and the Multiplier

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Crises and Consequences

Events and Ideas

Open-Economy Macroeconomics

Graphs in Economics

toward a Fuller Understanding of Present Value

Filters